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Financing the Deficit of the State Budget by National Bank of Georgia (1996-1999)

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  • Jacek Cukrowski

Abstract

In this paper the concept of total gross seigniorage is used to analyze sources of revenues of National Bank of Georgia (NBG) and their distribution in the period 1996.1999. A comprehensive framework for measuring total seigniorage and its main components is presented and estimates of seigniorage revenues (sources and uses) are computed and analyzed. It is shown that in the considered period fiscal revenues from NBG have not been extensively financed by the money supply (consequently, cannot be estimated by the monetary seigniorage), but have been mostly covered by the reduction of the non government debt hold by central bank. Since the stock of international and private domestic assets hold by National Bank of Georgia is limited, in long run NBG cannot rely on it. The only way how, in the future, NBG can finance large deficits of the state budget is to use monetary seigniorage. This, however, will have to be accompanied by significant growth of monetary base and will cause a danger of large inflation.

Suggested Citation

  • Jacek Cukrowski, 2000. "Financing the Deficit of the State Budget by National Bank of Georgia (1996-1999)," CASE Network Studies and Analyses 0215, CASE-Center for Social and Economic Research.
    • Handle: RePEc:sec:cnstan:0215
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    References listed on IDEAS

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    1. Manfred J. M. Neumann, 1996. "A Comparative Study of Seigniorage: Japan and Germany," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 14(1), pages 104-142, July.
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    Cited by:

    1. Jan Herczynski, 2002. "Key Issues of Governance and Finance of Kyrgyz Education," CASE Network Studies and Analyses 0244, CASE-Center for Social and Economic Research.

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    Keywords

    Georgia; deficit;

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